The Philomath City Council delayed a decision on proposed utility rate increases at its Monday night meeting until the city receives bids on the new water treatment plant.
Mayor Christopher McMorran suggested not voting on the matter until the city could receive solid numbers and not rely on engineering estimates.
“Because of engineering delays, we haven’t gotten a bid on the water treatment plant yet and so my preference would be to pause this just until we actually have a number from a contractor to work with,” he said. “Especially in recent years, there have sometimes been discrepancies between engineer’s estimates and actual bids — above or below — and I would feel a lot more comfortable making this decision once we know exactly what we will be paying.”
City Manager Chris Workman agreed with McMorran’s assessment to hold off until the city has actual numbers. The request for proposals for the water treatment plant’s construction is scheduled to go out Jan. 19.
“We’re probably looking at March before we’re going to have a number for you,” Workman said. “I think it’s beneficial to know what the number is … we don’t know how close that engineer’s estimate is — it could be a million dollars off one way or another.”
Workman believes that an original project estimate of $12 million dates back to 2017 or 2018 — that number including both the new plant and water reservoir. Water rates were increased from 2019 to 2021 to raise enough funds to cover the payback of a 20-year loan. Philomath was then awarded a $12 million grant by the state to fund the entire project and the city dropped the water base rate back down.
A new estimate on the combined cost of the plant and reservoir came in at $16 million.
Workman said the city has around $8 million remaining in the funds awarded by the state with roughly $4 million spent on the reservoir.
“If the treatment plant today only cost about $8 million, we’d be OK,” he said. “It looks like it’s more like $12 million for just the treatment plant now, so we’re short that $4 million.”
Thus, the utility rate increases would be put in place for the city to be able to make principal and interest payments on the estimated $4 million debt that the city would incur.
The proposed changes would impact Philomath residents over the next 19 months. For customers with standard 3/4-inch meters, the base water rate increases would be phased in from $18 to $25 by July 2027.
The current volumetric water rate for a typical customer is $6.55 per unit and under a tiered system, households that use five units or less would see the rate drop to $5.70. Higher users would pay more under the system — $8.55 per unit for six to 11 units and $11.45 per unit for 12 or more units.
The base rate for sewer would increase from the current $37.20 to $38.75 by July 2027. The sewer volumetric rate would go up from $8.75 to $9.15 per unit of water used. The storm water rate would go from the current $3.35 rate to $10, a rate hike connected to more aggressive requirements to treat storm water before it reaches streams and rivers.
The project has seen significant delays and Workman said he can point to several factors that contributed to the drawn-out timeline. However, he did identify three primary problems that were seen.
“We probably lost upwards of close to eight months to a year because of the issues with the reservoir slab that were there and then having to get that repaired and just getting through the legal hurdles and making sure we were covered,” Workman said.
Separately, a new plant in Jefferson had problems after construction was completed, which required extra time from Westech Engineering to get things squared away, Workman told the council. However, lessons learned by Westech could benefit Philomath.
“I think the engineer would tell you that they’re taking a lot of things into consideration on the front end and baking things into the RFP so that there’s less work to do … less questions and concerns that will come up from the actual contractor,” Workman said. “I think that was experience gained from Jefferson where they spent eight months after it was even built and were still working through issues with the design and everything.”
Workman said that although the city has had a great relationship with Westech through the years, he questioned whether the company had the appropriate resources allocated to the project.
But at this juncture, he believes Westech is fully focused on Philomath.
“They kind of missed the boat on this one a little bit and it’s costing us money and that’s not good,” Workman said. “We’re keeping a very close eye on that and I hope that there’s not negative ramifications that still come from there but there might be. So we’ll see.”
Workman mentioned that the city has fulfilled its contract obligation to Westech.
“We’ve not made any more payments than what we committed to pay them so they’re spending time on their own dime at this point to finish this up,” Workman said. “Their delays are hurting them, for sure, as much as they’re hurting us.”
A financial complication comes down to the grant awarded by the state with a deadline to spend the money by the end of this year.
“So we’re concerned about getting the plant built this year,” Workman said. “We’re working with Business Oregon (the state’s economic development agency) and exploring ways to try to get some extensions on that so we can get a little bit more time.”
Workman said the state has been aware of the delays that the city has faced.
“The concern is there’s only so much they can do with federal funding that went to Business Oregon to distribute — it’s all federal funds and so they have to report back to the federal government,” Workman said.
The money originated through the American Rescue Plan Act of 2021, a stimulus bill intended to help the United States recover from the COVID-19 pandemic. The city submits payments to Business Oregon for reimbursement as the project moves along.
Mike Murzynski, finance director, expressed some concern about the delay with a 2025-26 budget to put together.
“It’s doable, it’s just going to be tight,” Murzynski said.
Workman believes construction on the plant will begin possibly as early as this spring.
After deciding that the vote would be delayed, councilors spent about 25 minutes going through various details, such as the proposed tier system, employee workloads and other financial impacts.